Budget 2016 – key points for the bakery sector

A rise in the number of businesses able to access Small Business Rate Relief, and a tax on sugary drinks, were among key commitments set out by the Chancellor, George Osborne.

British Baker picks out the key points for the bakery sector:

Small Business Rate Relief

Osborne announced a rise in the Small Business Rate Relief threshold, to allow more businesses to become eligible. From April next year, businesses with a rateable value of up to £15,000 will be able to apply for 100% relief, up from the current threshold of less than £6,000.

The higher-rate threshold, which allows businesses to have their rates assessed with the small business multiplier, will also be raised from £18,000 to £51,000.

Osborne said: “Let me explain to the House what this means. From April next year, 600,000 small businesses will pay no business rates at all. That’s an annual saving for them of up to nearly £6,000 – forever.

“A further quarter of a million businesses will see their rates cut. In total, half of all British properties will see their business rates fall, or be abolished altogether.”

Osborne said the move was to allow small businesses to compete better with online retailers, such as eBay and Amazon.

Carolyn Fairbairn, director general of the Confederation of British Industry (CBI), said: "Businesses will welcome the Chancellor’s permanent reforms to business rates – taking more small firms out of the regime and changing the uprating mechanism from RPI to CPI, which the CBI has long been calling for."

Sugar Tax

The Chancellor responded to calls for a sugar tax to tackle childhood obesity, by promising a tax on sugary drinks.

The tax will be levied in two bands, one for drinks with a sugar content of over 5 grams per 100 millilitres, and a higher band for those exceeding 8 grams per 100 millilitres.

It will not come into force for two years, to allow manufacturers time to adjust their product mix, and will not apply to pure fruit juice or milk-based drinks.

However, Osborne expressed no intention to extend the levy to cover the bakery or confectionery sectors, which will come as a relief to many in the industry.

He said: “Some may choose to pass the price on to consumers, and that will be their decision, and this would have an impact on consumption too. We understand that tax affects behaviour. So let’s tax the things we want to reduce, not the things we want to encourage.”

Ian Wright, director general of the Food and Drink Federation (FDF), responded negatively to the move, saying: “We are extremely disappointed by today's announcement of a new tax on some of the UK’s most successful and innovative companies. For nearly a year we have waited for an holistic strategy to tackle obesity. What we've got today instead is a piece of political theatre.

“The imposition of this tax will, sadly, result in less innovation and product reformulation and, for some manufacturers, is certain to cost jobs. Nor will it make a difference to obesity. Many of those singled out today by the Chancellor have been at the forefront of efforts to provide consumers with healthy choices. The industry will now ask whether such efforts are still affordable.”

Corporation Tax

The Chancellor announced further cuts to the UK rate of corporation tax, committing to reduce it from 20% at the start of the current parliament to 17% by April 2020. He said the reduction would be paid-for reforms to how multinational companies pay tax, closing loopholes to raise an extra £9bn a year.

Fairbairn welcomed the move, saying: "The reduction in the headline corporation tax rate sends out a strong signal that the UK is open for global business investment."

Infrastructure

Osborne promised investment to improve transport in the north of England. In addition to promising upgrades to the west-east A66 and A69 roads, he also committed to finding new money to establish a four-lane M62, a major road connecting Liverpool, Manchester, Leeds and Hull. He also announced a boost for the northern rail network, greenlighting High Speed 3 (HS3) between Manchester and Leeds.

Further south, London also received attention, with Osborne committing to commission Crossrail 2.

disappointing

Reacting to the budget, Alan Clarke, chief executive of Scottish Bakers, said: "Its disappointing to learn that the economy is not recovering as quickly as the Chancellor predicted. With the Chancellor committed to reducing the deficit, the options that he has to stimulate growth in the economy are more limited.

"It is heartening that there is support for the oil industry, the reduction in oil prices has had a major economic impact on the North East of Scotland. The changes to business is rates is welcomed as is the freeze on fuel duty.

"However the speed with which the National Living Wage has been introduced this year, combined with the mandatory company pension contributions will significantly increase costs for bakers this year and we are highly concerned that this will lead to job losses within the Scottish bakery sector especially within rural areas."